Vaalco Energy Fundamental Analysis

EGY, Vaalco Energy, is an independent energy company founded 22 years ago in Houston, Texas. This company explores, transforms and produces crude oil and natural gas at its Texas Golf facilities and offshore in West Africa – Gabon.

In the end of 2005 this company had reserves of 7827 million barrels of crude oil and 21 million cubic feet of natural gas.

This year the company will develop its new discovery at Avouma/South Tchibakla by setting up a new platform and pipelining it to the FPSO field. Still regarding this year’s investments, the platform in Louisiana will be ready during the summer, with its first production expected by the end of the 2006 fourth quarter.

With an operating margin of 76.12%, this margin comes exclusively from the difference between the income (received prices) and the production costs of the previously referred commodities.
The recent drops in the USD rate exchange versus other major currencies like the GBPound and the Euro are affecting the company’s results (both operational and financial); this is mostly due to the fact that its offshore operations are denominated in the local currency (tight to the Euro) and not in Dollars as it is domestically.

The net cash generated by the operating activities last year was nearly $36 million, a growth of more than $23M when compared to 2004.

This company’s primary capital resources come from operations cash flows, equity sales, money debt purchase and borrowings. At the end of last year the cash balance was near $44 million.
Together with this years operating profit, the company believes its cash balance will be enough to fund the development of the Avouma field and to make a few additional investments in working capital.

Stocks closed at $8.46 on August 14th, almost 20% down from the 52 week maximum at $10.45.